FIG. 1 illustrates schematically a payment method often used for making payments by payment card, such as a credit or debit card.
The payment card 102 is a smart card having a built-in chip 103, and is presented by a customer at a point of sale. The card is placed in a chip reader 104, which reads the chip and requests that the customer types his/her PIN (personal identification number). The correct PIN is stored on the electronic chip 103 and thus the chip reader 104 is able to immediately verify whether the PIN has been correctly entered. The card details and transaction details are then transmitted to a credit card clearing house (CCCH) 106, for example via a telephone line, and the credit card clearing house settles both the customer's account and the merchant's account, by transferring money from customer's bank 108 to the merchant's bank 110.
There are a number of drawbacks with the method represented by FIG. 1. Firstly, all businesses that wish to accept payments by smart card require a chip reader 104, which is costly, and not practical in many situations. Furthermore, the chip reader requires regular maintenance. There is thus a need for alternative means for verifying a customer's identity, and making electronic payments.